Gold prices have reached an unprecedented high, surpassing $3,000 per ounce for the first time in history. This rise was driven by several factors, most notably increased central bank purchases, global economic challenges, and the impact of former US President Donald Trump’s trade policies. Among the most prominent of these policies was the imposition of tariffs on allied countries and strategic competitors, adding further pressure to the markets.
On Friday, gold prices reached $3,001.20 per ounce, up about 0.4%. This new psychological level is a strong indicator of gold’s status as a safe haven in times of economic and political turmoil, as the yellow metal remains a key barometer of global market concerns.
Gold as a Store of Value: A History of Massive Rallies
Over the past quarter century, the price of gold has seen an astonishing increase. Its price has increased tenfold, while the Standard & Poor’s 500 Index, the leading gauge of US markets, has only quadrupled during the same period. Gold, therefore, is one of the oldest assets to turn to in difficult times, demonstrating its vital role in preserving value.
Economic Impacts and Tariffs
The significant increase in gold prices coincided with markets preparing for the imposition of tariffs. This prompted traders to increase their purchases of US gold, outpacing other international indices. At the same time, the flow of bullion to the US accelerated at a massive rate, with more than 23 million ounces of gold, worth nearly $70 billion, flowing into the warehouses of the COMEX in New York between Election Day and March 12.
This massive influx of gold contributed to the US trade deficit increasing to unprecedented levels in January, reflecting the extent to which US economic measures are impacting global markets.
Gold Jumps and an Economic Wake-Up: History Repeats Itself
Gold price increases often coincide with major economic and political crises. The price of gold surpassed $1,000 per ounce in the wake of the global financial crisis in 2008, and reached over $2,000 during the COVID-19 pandemic. After the pandemic, gold prices fell to around $1,600, but quickly began to rise again in 2023.
The main reason for this increase is central banks’ shift toward buying bullion as a means of diversifying their investments and away from the US dollar. This shift came amid concerns that US sanctions could make the dollar more vulnerable to risk, prompting these banks to seek safer assets.
Monetary Policies and Their Impact on Gold Prices
On the other hand, monetary policies play a pivotal role in gold movements. For example, data has shown that central banks around the world have taken steps to significantly increase their gold reserves. In this context, gold is viewed as a hedge against inflation and financial crises.
With successive economic crises, global investors’ interest in the precious metal is increasing. Despite political and economic pressures, gold remains one of the most trusted assets. Throughout history, gold has proven its resilience in face of financial crises, making it a preferred choice for investors in difficult times.
Gold Prospects Amid Global Crises
Gold prices are expected to remain under upward pressure in the near future due to ongoing global economic challenges. Indicators suggest that economic conditions may not improve quickly, especially with escalating geopolitical tensions and the imposition of further tariffs on some major countries.
Some experts expect gold to see further gains in the coming years, especially if central banks continue to increase their gold purchases as part of investment diversification strategies. This would boost demand for the yellow metal, strengthening its position as a hedge against future economic risks.
Gold Prices Hit Record High: Growing Demand and New Accounts Open
Gold prices have recently reached new record highs, boosting investor sentiment and increasing demand. Also gold prices have reached multi-year highs, with the total value of securely stored gold reaching more than $4.0 billion (£3.2 billion, €3.8 billion, ¥606 billion). With the number of new investors rising to its highest level since May 2021, the number of people who started or added to their gold holdings increased by 33.6% compared to January. Conversely, the number of people who sold gold decreased by 17.0%, despite the new gold prices achieving significant gains.
Gold Investor Index Rise: A Sign of Optimism
This trend led to a 3.6-point increase in the Gold Investor Index, the largest increase in 10 months, to reach 56.3, the highest level since October 2022. This index reflects the balance between gold buyers and sellers during the month. It reached a decade-high of 65.9 in March 2020 at the beginning of the COVID-19 pandemic, while it declined to 47.5 in March 2024.
A reading above 50.0 indicates a balance between buyers and sellers during the month, reflecting increased investor interest in gold as a safe haven in times of uncertainty.
Gold as a Hedge amid Tensions Geopolitics
Western investors have joined emerging market central banks in using gold as a comprehensive hedge against economic and political risks. At the same time, traders are closely monitoring the effects of monetary policy and global volatility, which has contributed to increased investor appetite for gold.
Gold, which is priced in dollars, set ten new record prices in February, matching the number set in September 2011, when the yellow metal reached its peak during the global financial crisis. Gold also set new record highs in euros and British pounds, reflecting continued price increases across all major currencies.
Volatility and Profit-Taking Opportunities
Gold prices fluctuated by approximately 6% across all major currencies last month. This volatility provided long-term investors with the opportunity to book profits before buying gold when it dips, attracting new investors to the market. In fact, many of these investors believe that volatility contributes to increased long-term profit opportunities.
Global Gold Demand Rebound
Global markets witnessed a four-year increase in demand for gold in February 2024. However, this increase is still far from the peak levels seen during previous crises, such as the COVID-19 crisis in August 2020 or the global financial crisis in September 2011.
While gold demand continues to set records, it has not yet reached the “gold war” stage witnessed during major crises.
New Users Increased Worldwide
The number of new users who funded their accounts to purchase gold for the first time last month increased by 22.4% compared to January, and was 62.5% higher than the monthly average throughout the year. The United Kingdom topped the list of countries experiencing the largest increase in gold exports, followed by Germany and the United States, reflecting growing interest in buying gold as a safe investment in Europe and North America.
Geopolitical Trends and Their Impact on the Gold Price
Opinion polls have shown that geopolitics is now the primary driver of gold prices, surpassing monetary policy for the first time since the start of the Russian invasion of Ukraine in 2022. This trend indicates that many investors are now focused on protecting their funds from increased geopolitical volatility.
Despite the significant increase in demand for gold, this trend remains far from the peaks of previous crises. Nevertheless, the yellow metal continues to attract attention as a store of value and a hedge against economic and geopolitical risks.
